The sequester may be bad policy, but it’s not going to tank our economy.

By Rich Lowry —
February 22, 2013

Prepare for the end of food safety as we have known it. For a breakdown in public order. For little children languishing in ignorance. If only Edward Gibbon were here to chronicle the devastation. On March 1, the fabric of our civilization begins to unwind.

That’s when the economy begins to stall and we turn our back on our values, all because the federal government will have to begin to cut a few tens of billions of dollars from the largest budget the world has ever known.

This is the lurid fairy tale spun by President Barack Obama. In the fight over the sequester, he is resorting to the tried-and-true (and tiresome) strategy of every official confronted with unwelcome budget cuts, from the commander in chief to a lowly bureaucrat toiling at some school district: maximize the scaremongering and pain.

In Hans Christian Andersen terms, Obama is the princess and the sequester is the pea. Over the next ten years, the sequester amounts to a $1.16 trillion cut, or roughly 3 cents on every federal dollar. If we can’t squeeze a couple of pennies out of every dollar, we might as well begin our great national bankruptcy proceedings right now.

This year we are supposed to cut $85 billion from a $3.5 trillion budget. And it won’t even be that much. According to the Congressional Budget Office, the federal government won’t be able to cut the full $85 billion. It will manage to cut only about half that in 2013.

As Yuval Levin of the journal National Affairs points out, even with the sequester, the federal government will spend a little more in 2013 than in 2012, $3.553 trillion compared with $3.538 trillion. Welcome to the Age of Austerity.

Even with the sequester, non-defense discretionary spending will still be up almost 10 percent since 2008. Even with the sequester, federal spending is projected to be a robust 22.8 percent of gross domestic product in 2023. Even with the sequester, the debt will hit 100 percent of GDP just two years later than it would otherwise, according to the Bipartisan Policy Center.

It’s hard to see how a cut of a little more than $40 billion this year can possibly tank a $16 trillion economy. Or why keeping the deficit the same as it is projected to be this year, at about $845 billion with the sequester cuts already accounted for, will be a shock too severe for the economy to take.

None of this should be taken as a brief for the sequester as policy. It is a classic instance of Washington coming up with a stupid kick-the-can compromise and then proceeding to have an even stupider debate over what to do next. The bastard spawn of the debt-ceiling fight, the sequester is designed to be crude and unappealing to all sides. It disproportionately and thoughtlessly hits defense spending and domestic discretionary spending. There is very little to recommend it — except that it is actually a spending cut in a Washington where that is the rarest of creatures.

Ideally, Congress and the president would agree on more targeted and intelligently crafted savings. But the president insists on more tax increases. The other day he said a cuts-only replacement for the sequester would be as absurd as a taxes-only agreement on overall deficit reduction. Yet he exacted a taxes-only agreement from Republicans over the fiscal cliff, with nary a concern about making the deal more “balanced.”

Since Republicans rightfully aren’t budging on tax increases so soon after giving the president a tax hike that hit 77 percent of households (thanks to the expiration of the payroll-tax cuts), the sequester seems certain to happen. Presumably, its cuts will be more rationally allocated at some later date. For now, to paraphrase Phil Gramm talking about Gramm-Rudman-Hollings, his own budgetary blunderbuss from the 1980s, the sequester is a bad idea whose time has come.